LOLC’s Rs. 10 b debenture issue draws 202 applications

The oversubscribed Rs. 10 billion listed debenture issue of LOLC Holdings PLC has drawn 202 applications mostly from institutional investors, the Company disclosed yesterday. 

It was the largest non-bank listed debenture issue. 

The offer was for 75 million listed rated senior unsecured redeemable debentures at Rs. 100 each with an option to issue a further 25 million in the event of oversubscription of the original amount. The issue was assigned ‘[SL] A (stable)’ rating by ICRA Lanka. The issue included three types of debentures.

Type A was five-year tenor and offered 10.25% per annum payable annually and attracted 69 applications via bank drafts and cheques requesting for Rs. 309.39 million worth of debentures and 21 applications via RTGS, SLIPS. CFTS transfers requesting for 1.9 billion worth of debentures and three applications via bank guarantees requesting for Rs. 1.375 billion worth of debentures. 

Type B was five-year tenor offering 9.85% per annum payable quarterly (AER of 10.22%) and attracted 37 applications with payments via bank drafts and cheques requesting for Rs. 322.89 million worth of debentures; and three applications with payments via RTGS, SLIPS, CEFTS transfers requesting for Rs. 605 million worth of debentures. 

Type C was 10-year tenor offering 12% per annum payable annually. It attracted 49 applications with payments via bank drafts and cheques requesting for Rs. 968.2 million worth of debentures, 17 applications with payments via RTGS, SLIPS, CEFTS transfers wanting Rs. 1.932 billion worth of debentures and three applications with Bank Guarantee payments requesting for Rs. 3.425 billion worth of debentures. 

NDB Investment Bank acted as the Managers to the Issue and Joint Placement Agents. The other placement agent was People’s Bank Investment Banking Unit.

The proceeds of up to Rs. 7.5 billion raised from the initial issue of debentures will be utilised by the company to re-finance an equal amount of short term/money market borrowings obtained from the commercial banks in the country.

LOLC intends to replace short-term debt with medium-term debt at fixed interest rates in order to mitigate interest rate risk due to market volatilities. Settling these short-term loans and refinancing the same via medium-term funds will enable the company to minimise the reliance on financial institutions for the financing of the working capital requirements. 

The gearing ratio of the company prior to the issue was 1.66. This is expected to remain unchanged following the debenture issue.

Outstanding short-term loans and overdrafts as at 30 September 2020 amounts to Rs. 31.45 billion of which Rs. 7.5 billion will be settled through the funds raised via the initial issue of the debentures.

Accordingly, outstanding short-term loans and overdrafts post debenture issue will be Rs. 31.44 billion. 

The company intends to utilise the funds raised through the oversubscription option of Rs. 2.5 billion to settle short-term loans and bank overdrafts to the value of Rs. 2,500 million from the remaining pool of over Rs. 31.44 billion outstanding short-term loans. 

The specific short-term loans to be settled through the proceeds from the oversubscription option will be selected based on the interest rates of these facilities at the time of settlement. These loans can be settled at any time at the discretion of the company without any penalty charges.